Compare the best small business loan interest rates online.

When searching for financing for your small business in Canada, it can be difficult to know where to start. From traditional lenders to government loans to alternative lenders like credit unions, a wide range of companies provide small business loans to entrepreneurs. Finding the right loan for your business can feel like searching for a needle in a haystack. Here’s a list of places to start when researching small business lending options:

Traditional banks: The first place many entrepreneurs will turn to finance their small business is a bank loan. Depending on the size and credit history of your business, however, it may be difficult for small business owners to secure a loan through the bank.

Government loans: Small business owners can apply for loans through various levels of government. At the federal level, for instance, small businesses or startups with $10 million in annual operating revenue or less are eligible to apply for a loan through the Canadian Small Business Financing Program. All three levels of government in Canada provide small business loans of some variety, though they may offer different amounts and may have different eligibility criteria.

In 2020, the federal government also launched the Canada Emergency Business Account, which provides up to $40,000 interest-free loans for small businesses in Canada. Small business owners must apply for this benefit through their financial institution.

Microloans: Microloans are a lesser-known type of small business lending in Canada are often offered by companies to other businesses that can’t afford, or are ineligible for, a traditional business loan. Very small businesses or startups may find themselves in this position. Some organizations that provide microfinancing include Western Economic Diversification Canada, Seed Capital Initiative in Atlantic Canada and The Social Innovation Zone in Ontario

Community loan funds: Banks aren’t your only options. Many non-profits also offer small business funding to entrepreneurs who may not be eligible for a bank loan. One example is Futurpreneur Canada, a national non-profit organization dedicated to funding small businesses. It’s important to keep in mind that interest rates may be higher if you go with this option.

Online lenders: Many small business owners turn to online lenders for financing. This can be a good option if you’re not quite eligible for a loan from one of the institutions listed above. While online lenders are known for approving small business loans quickly, they may also charge higher rates.

As a small business owner, there are a number of different types of loans you can apply for.

Here’s a comparison of the small business loan options available to you:

Personal loans: If your business has a short operating history, a personal loan might be the ideal way to fund your business. This is the kind of loan LowestRates.ca can help you get. Within this category, there are two types of small business loans you can apply for.

Personal loans for business — In some cases, it may be possible to apply for a personal loan to use for your small business. This option is common among early-stage founders who have just launched their own company and have limited operating history, as well as sole proprietors (such as freelance writers, artists, bookkeepers, or home based business owners).

Using a personal loan for your small business means that your personal finances will impact your chances of approval. This means that for applicants with bad credit, a small business loan may be hard to come by.

Lastly, if you choose to use a personal loan to fund your small business, the debt will be secured through your own personal assets. This means your house and your car. While this can be a little daunting, a personal loan can be a good option for small businesses with limited fixed assets, such as an internet business. Fixed assets usually refer to real estate or equipment.

Business credit card — When a company is in its early stages, it may be harder to qualify for a business loan. This is why some entrepreneurs choose to use a credit card to cover these expenses. This is one of the easiest forms of credit to access, and might be a good option for a limited time. However, there are some risks to taking this approach. You may wind up paying a higher interest rate on this loan than you would on a commercial loan.

Some entrepreneurs choose to use a credit card to cover expenses in the early stages of their business. While this may be one of the easiest forms of credit to access, there are risks to this approach. For instance, you may wind up paying higher interest rates than you would for a personal loan and your individual credit score could be impacted if your business falls on hard times.

Commercial loans for small businesses: Founders whose businesses are large enough to qualify may apply for a business loan rather than a personal loan. This means that the debt is insured through the businesses’ assets, building, equipment, and accounts receivables, for example.

Line of credit— A line of credit allows founders to borrow as much as they need whenever they want, up to a predetermined amount. A line of credit is secured by inventory and the company’s accounts receivables. Banks can demand full repayment at any time.

Term business loan — Term loans are often designed to be given to the borrower in one lump sum and then repaid at regular (usually monthly) installments over a predetermined period. Term loans are usually used to finance fixed assets, such as commercial real estate, machinery, or equipment.

Working capital loan — Where a term loan deals with long-held assets, a working capital loan deals with the day-to-day function of the business. This type of loan can be used to fund the daily operations of the company, from inventory purchasing, to marketing, to producing web content about small business loans.

Regardless of how you choose to finance your small business, there are a few steps you should take to increase your chances of being approved and of getting the best rate possible. Keep reading to learn how to get a small business loan in Canada.

Prepare a business plan and financial projections — The best way to prove to your lender that your business is a safe bet is to prepare a business plan, including statistics and data, to demonstrate that your project is low risk. Your business plan should include financial projections for a few years out along with your estimated cash flow and total revenue. Lastly, you should include anything you’ve personally invested into the business and collateral for the loan should you default.

Check your credit history — Your credit history, any previous bankruptcies, and your debt repayment history may factor into how lender view your loan application today. You can improve your credit score by paying your bills on time, keeping your credit use rates low, separating business and personal finances where possible, and avoiding debt collection and bankruptcy.

Shop around — Different banks, government agencies and alternative lenders offer a range of loan products and it’s important to read the fine print. LowestRates.ca can help streamline the process for founders applying for personal loans by comparing a number of different offers in just a few minutes. Furthermore, in order to make sure you’re getting the best rate on your small business loan, it’s important to compare the market.